UK Government Backpedals on Welfare Cuts

George? Parker, Financial Times

Monday, 13 Jun 2011 | 12:56 AM ETFinancial Times

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Britain’s ruling coalition is to modify its plan for a rigid £26,000 annual cap ($42,190) on the total benefits that can be claimed by any household, amid fears it could force thousands of poor families out of their homes in London, the FT reports.

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David Cameron

Finance minister George Osborne announced the policy to popular acclaim last year; he told the Tory conference it was not fair that 50,000 families received more in benefits than “the average family gets from going out to work”.

But officials have warned ministers that some large families in high-cost housing, mainly in London, would be unable to stay in their homes and could be displaced to cheaper locations far away from the capital.

Although Mr Osborne insists the policy is extremely popular and must be implemented, Iain Duncan Smith’s work and pensions department is looking at ways of phasing in the new limit and offering help to particularly vulnerable families.

The rethink is the latest example of the coalition being forced to recast policies designed to save money in the face of facts on the ground.

On Monday, David Cameron will explain to Tory MPs his proposals to scale back planned health reforms, in the face of opposition from the medical profession and the Liberal Democrats. Last week, he ordered a retreat on plans to cut prison sentences for serious criminals who plead guilty at an early stage, under pressure from Tory rightwingers and the tabloid press.

Ministers are preparing to soften the impact of the £26,000 cap once the welfare reform bill completes its Commons third reading on Wednesday and heads off to the Lords.

Lord Freud, welfare minister, told the BBC’s Politics Show that while some protections were already in place – households with a disabled person are exempt – he was looking at ways to help those in “exceptional circumstances” and “wherever we think there’s something happening that is undesirable”.

Mr Osborne told last year’s Tory conference that no family should be exempt from the cap “unless they have disabilities”.

The Lib Dems have urged the rethink, although they are reluctant to publicise the fact because the policy is popular with the public. Meanwhile, Eric Pickles, communities secretary, is said to be worried about the cost of possibly rehousing thousands of families.

A spokesman for the Department for Work and Pensions said: “We have always said that we wanted to look at the sort of help available for those people in particularly difficult circumstances.

“However, the point of the benefit cap is to set a limit as to what people can expect from the system when they are not working. The government believes it is not fair that people who are in work can earn less than those who are on benefits.??”